1. Chapter 3.1/2 notes Free Enterprise System

2. – Capitalist system also known as free enterprise system anyone is free to start a business or enterprise private ownership of factors of production – System gives right to own and exchange private property voluntarily – Open opportunityability to enter, compete in market of ones choice – Legal equalityeveryone has same economic rights under the law – Free contractright to decide which legal agreements to enter into – Profit motiveincentive to gain from economic activities

3. EXAMPLE: Competition over Books – Demand for books high; competition driving out small booksellers – Before 1995, small chain stores and independents dominant – 1995, large chains offered discounted prices, appealing atmosphere – 1995, online booksellers (Amazon) open with huge number of titles, low prices – small stores now offer personal service, local or specialized topics

4. 3.2 notes The Role of the Producer – to make a profit Example – charge highest price people will pay Productive resources will go where there is profit

5. Role of consumer – Consumers help allocate resources through their choice of products their choices guide producers to provide what consumers will buy Example – low carb food in the early 2000s

6. Govt in U.S. Economy – Government important but with limited role in U.S. economy – Modified free enterprise economy: government protections, provisions, regulations adjust capitalism